Bunzl shrugs off UK lethargy

Profits at acquisitive distribution and outsourcing firm Bunzl were comfortably ahead of expectations in 2011, with the new bits and the old bits of the company all chipping in with strong performances.

Revenue rose 6%, or 7% using constant exchange rates, to £5,109.5m in 2011 from £4,829.6m in 2010, ahead of the market consensus forecast of £5,066.23m. Organic revenue growth of 4% was at its highest level since 2006, despite lower sales in the UK and Ireland.

Adjusted profit before tax jumped 11% to £306.1m from £276.2m the year before, ahead of market expectations of £287.9m.

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Adjusted earnings per share of 68.5p were ahead of the market forecast of 66.36p and up 13% from 2010's 23.35p. The full year dividend has been increased in line with earnings from 23.35p to 26.35p' the market had pencilled in 25.98p for the full year divi.

The group operating margin (before intangible amortisation and acquisition related costs) rose by one-fifth of a percentage point to 6.6%.

"A combination of strong organic growth, good performance from the acquisitions made in 2010 and increased acquisition spend during 2011 all contributed to another successful year," declared Michael Roney, Chief Executive of Bunzl.

Talking of acquisitions, Bunzl is at it again, acquiring Chicago-based CDW Merchants, a retail gift packaging and visual merchandising solutions and products to the speciality retail and online retailing sectors throughout the USA.

Bunzl was being coy about the cost of the acquisition but did reveal that CDW's revenue in the year ended 31st December 2011 was $11.9m and the gross assets acquired are estimated to be $1.3m, so in Bunzl's terms it qualifies as a small bolt-on acquisition.

The pipeline for acquisitions by no means voided as the group continues discussions with a number of potential targets.

Net debt at the year end was £652.9m compared to £716.8m at the end of 2010. The net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio reduced to 1.7 times compared to 2.1 times at the previous year end.

"Looking ahead, even though the outlook for economic growth remains uncertain, we believe that our resilient business model, strong market position and promising acquisition pipeline will continue to provide further opportunities for the growth and development of the group," Roney said.

"In North America we expect continued strong organic growth with stable operating margins. In Continental Europe, while we anticipate lower organic growth compared to 2011 as a result of the reduced economic growth forecasts for many European economies, we will benefit from the positive impact of the acquisitions completed in 2011. In UK & Ireland, in spite of the ongoing sluggish economy, we expect to see an improved performance this year. Rest of the World should experience strong organic growth and the full year impact of the acquisitions made in 2011 will enhance the overall results," Roney predicted.

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